High Court grants injunction against BAE settlement

2 March 2010

The High Court has granted an injunction prohibiting the Director of the Serious Fraud Office (SFO) from taking any further steps in its plea bargain settlement with BAE Systems.

The injunction is in force until the Court has decided whether or not to give permission to Campaign Against Arms Trade (CAAT) and The Corner House to apply for a judicial review of the settlement. It will make this decision by 20 March 2010.

Lawyers acting for The Corner House and CAAT formally lodged papers seeking judicial review permission on Friday 26 February 2010, together with a request for the injunction.

ENDS

For further information or an interview please contact:
Kaye Stearman of CAAT, on 020 7281 0297 or 07990 673 232 or Nicholas Hildyard of The Corner House on 01258 473795 or 07773 750 534.

Legal documents
Background

The Serious Fraud Office has been investigating alleged bribery and corruption in BAE’s arms deals since 2004 in several countries (including Chile, Czech Republic, Qatar, Romania, Saudi Arabia, South Africa and Tanzania). BAE is alleged to have paid bribes, often in the form of commissions to "advisers" to clinch the deals.

On 1 October 2009, the SFO announced that it intended to prosecute BAE Systems for offences relating to overseas corruption. See SFO press release

On 29 January 2010, the SFO charged Count Alfons Mensdorff-Pouilly with conspiracy to corrupt in connection with BAE's deals with eastern and central European governments including the Czech Republic, Hungary and Austria. In the course of these preliminary hearings, the SFO told the courts that "From 2002 onwards, BAE adopted and deployed corrupt practices to obtain lucrative contracts for jet fighters in central Europe." It was a "sophisticated and meticulously planned operation involving very senior BAE executives". See Observer, 7 February 2010. On 4 February 2010, Mensdorff-Pouilly was granted bail of £1million.

On 5 February 2010, however, the SFO announced its plea bargain settlement with BAE. Under the SFO’s proposed settlement, BAE would plead guilty in court to "accounting irregularities" in its 1999 sale of a radar system to Tanzania and would pay penalties of £30 million. The SFO would not bring prosecutions relating to alleged bribery and corruption in BAE’s arms deals elsewhere, including in the Czech Republic, South Africa and Romania.

This settlement was announced in conjunction with a much larger settlement made by the US Department of Justice with BAE. Under this settlement, BAE admitted making false statements in 2000-2002 in relation to BAE's arms deals with Saudi Arabia and passing covert payments through the United States in regard to its arms deals in Central European countries. It will be fined $400 million (£256 million). Because it has not pleaded guilty to corruption charges, BAE can continue to bid for US military contracts.

Later on 5 February 2010, the Serious Fraud Office announced that it was withdrawing proceedings against Count Alfons Mensdorff-Pouilly on the grounds that it was no longer in the public interest to continue.

CAAT and The Corner House sent a Letter Before Claim to SFO Director Richard Alderman on 12 February, and asked the Courts on 26 February 2010 for permission to apply for a judicial review of the settlement.

The groups contend that the proposed settlement is unlawful because the SFO did not follow the correct prosecution guidance (including its own guidance) on plea bargains.

They argue that the agreement does not reflect the seriousness and extent of BAE's alleged corruption and bribery offences, and does not provide the court with adequate sentencing powers.

The groups also hold that the SFO unlawfully concluded that the factors weighing against prosecuting BAE on bribery and corruption charges outweighed those in favour of prosecution.

Lawyers acting for the two groups have also requested a judicial review of the SFO’s decision to discontinue its prosecution of Count Alfons Mensdorff-Pouilly. The Corner House and CAAT argue that this decision was unlawful because the SFO failed to follow its own guidance on corporate prosecutions; failed to act in the public interest and the interests of justice; and because the decision was irrational.

Notes
  1. Campaign Against Arms Trade (CAAT) works for the reduction and ultimate abolition of the international arms trade together with progressive demilitarisation within arms producing countries. The The Corner House aims to support democratic and community movements for environmental and social justice through analysis, research and advocacy.
  2. In December 2006 the SFO dropped its bribery and corruption investigations into BAE's arms sales to Saudi Arabia, following pressure from BAE and Saudi Arabia and a direct intervention from then Prime Minister Tony Blair. The decision was subject to severe criticism and prompted CAAT and The Corner House to launch a Judicial Review of the decision. In April 2008, the High Court ruled that the SFO Director had acted unlawfully by stopping the investigation; that judgment was subsequently overturned by the House of Lords in July 2008, which ruled that he had acted lawfully when faced with a threat to national security. For more details click here.
  3. The Serious Fraud Office is a UK government department that investigates and prosecutes complex fraud.
  4. BAE Systems is the world's fourth largest arms producer. It makes fighter aircraft, warships, tanks, armoured vehicles, artillery systems, missiles and munitions. Its foremost markets are Saudi Arabia and the United States. It has consistently denied any wrong-doing. More information: here.
  5. A judicial review is a court proceeding in which a judge reviews the lawfulness of a decision or action made by a public body. Now that CAAT and The Corner House have lodged papers at the High Court requesting a judicial review, the Serious Fraud Office Director will submit his legal arguments and a witness statement arguing why the decision to offer a plea bargain settlement with BAE was lawful. A judge will then consider the papers from both sides and decide whether to grant or refuse permission for a full judicial review hearing.
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